1 Regional Development in Italy: the North South Divide and the case of Calabria

1.1 Introduction

The way in which innovation takes place in a country - from the firm up to the national level - dictates the path of it’s regional development. The path toward high income status for countries in the West has been through movements of labour out of low productivity sectors like agriculture, and into high productivity manufacturing. Today, there is a shift towards high-skilled service industries and the knowledge economy as the nexus through which innovation takes place and drives growth. In Italy, regional inequalities have been exacerbated by a rise of high-skilled manufacturing and later services in the North and a lagging behind in terms of growth in the South. National-level wage setting focussed on industries in the North has resulted in a higher than optimal level of unemployment in the South, with wages set above the marginal product of labour. Lacking positive spillovers from highly dynamic industries, Calabria has fallen behind the national average in terms of regional GDP, and is seeing slower population growth than it’s neighbouring regions in the North.

This essay examines the way in which Calabria in Southern Italy has failed to keep pace with aggregate growth in the country through the lens of evolutionary economic geography focussing on four pillars of understanding regional growth: first, the timing of the adoption of general purpose technologies, second, the space along which comparative advantages were generated, third, the pace of structural change and fourth, the kinds of spillovers affecting efficiency within the region. The essay concludes by outlining a tool created to analyse these kinds of regional differentiations in Europe using data from the Rosés-Wolf database on regional GDP1.

1.2 Context

Calabria is a region on the Southern tip of Italy’s boot, rich in history and fecund agricultural land. It is a producer of many geographically protected agricultural products including varieties of olive oil and cured meats (Piscopo et al. 2021; Romeo et al. 2014). It is the world’s largest producer of citrus oils used in food, beverages, and medical preparations (Navarra et al. 2015). Despite having a long coastline, three of the largest national parks in Italy and ample natural beauty, Calabria is not a popular tourist destination in Italy, evidenced by the number of tourist nights spent in each region in 2018, depicted below.

Italian regions by number of visitors in 2018. Source: The Italian National Institute of Statistics

Figure 1.1: Italian regions by number of visitors in 2018. Source: The Italian National Institute of Statistics

1.3 Economic growth patterns in Calabria 1900-2015

1.3.1 Pillar one: time

The first pillar of the evolutionary economic geography framework asks what is possible given the historical context and the time in which development takes place. I begin by examining the evolution of regional GDP in Italy.

Calabria evidences the stark North-South divide in Italy, with the lowest regional GDP per capita of the 20 NUTS2 regions in Italy. in 2015, the latest year in the Roses and Wolf dataset, the magnitude of regional GDP per capita in Calabria is half of that of Lombardia, whose capital is Milan.

Regional GDP per capita in Italy 1900-2015 highlighting Calabria and Lombardia. Source: Roses and Wolf database on Regional Development in Europe

Figure 1.2: Regional GDP per capita in Italy 1900-2015 highlighting Calabria and Lombardia. Source: Roses and Wolf database on Regional Development in Europe

This is due in part to it’s sectoral employment share. In contrast to Lombardia in the North, Calabria has a relatively high share of employment in the agricultural sector since 1900, and the labour force has not shifted into industry as has been done in the North. One reason for this is the natural comparative advantage that the Southern region has in agriculture, given its Mediterranean climate which is more suitable to the cultivation of crops that require sunlight and detest frost, a feature which I touch on in the second pillar, space.

In the figure below we can see that the yellow sliver of the stacked area chart for Calabria is narrow, and expands only modestly since 1950. In contrast, the industry share of employment in Lombardia is wide, displacing agriculture (orange) to a large extent since 1900 such that by 2015, there is almost no agricultural employment in the Northern region. The picture for Italy as a whole is between these two extremes, and the services share of employment is remarkably similar across the three regions depicted.

Sectoral employment shares in Italy 1900-2015 highlighting Calabria, Lombardia and Italy as a whole. Source: Roses and Wolf database on Regional Development in Europe

Figure 1.3: Sectoral employment shares in Italy 1900-2015 highlighting Calabria, Lombardia and Italy as a whole. Source: Roses and Wolf database on Regional Development in Europe

Calabria also sees some of the highest rates of unemployment in Italy, with Eurostat data evidencing a rate of unemployment above 20 percent since 2012 in the region. The level of unemployment is more than double the national average (shown in orange) and four times that of Lombardia (shown in purple) in 2020.

Unemployment by region in Italy highlighting Calabria, Lombaria and Italy on aggregate. Source: Eurostat

Figure 1.4: Unemployment by region in Italy highlighting Calabria, Lombaria and Italy on aggregate. Source: Eurostat

The first pillar asks what is technologically possible given the technologies available at the time. While geographically disaggregated data on technology adoption was difficult to source, we can look at the kinds of general purpose technologies adopted in Italy as a whole, compared to other OECD nations. This may inform the distinction created between North and South in terms of the dynamics of innovation.

The figure below depicts the historical adoption of different kinds of general purpose technologies over different time periods, weighted by the population in each time period. Italy is highlighted in dark green while the United Kingdom’s path is shown in orange for context. The grey lines are all other OECD nations. It is evident that in the important categories energy output and early communication technologies (mail and newspaper circulation), Italy falls in the bottom quartile of all OECD nations. This relative insufficiency in early communication technologies may have contributed in part to the fragmented nature of innovation that Leydesdorff (2021) argues splits the North and South in Italy, and is returned to later. However, contemporary communication technologies of the digital age like mobile phones and personal computers present a more mixed picture. Despite a late take-off, the number of mobile phones per person in Italy in 2000 is higher than comparator the United Kingdom, and outperforms the majority of OECD comparators. While personal computers per capita in Italy lag behind other OECD nations, towards the end of the period there is a sharp increase signalling a potential catch-up.

Historical adoption of technologies highlighting Italy and the United Kingdom. Source: Historical Cross-Country Technology Adoption (HCCTA) Dataset from Diego A. Comin and Bart Hobijin

Figure 1.5: Historical adoption of technologies highlighting Italy and the United Kingdom. Source: Historical Cross-Country Technology Adoption (HCCTA) Dataset from Diego A. Comin and Bart Hobijin

1.3.2 Pillar two: space

The second pillar asks us to evaluate the spatial dynamics at play in the regional growth path of a particular region. As noted above, the Mediterranean climate in Southern Italy and Calabria is well suited to agriculture. In the map below I show the evolution of the share of employment in Agriculture across Europe. It is clear that Southern Europe, specifically Portugal, Spain and Italy, retain higher shares of employment in agriculture while the remainder of the continent becomes more purple over time, signifying a shift out of employment in agriculture. In this way, the spatial dynamics of Calabria dictate that following it’s comparative advantage in agriculture, it should specialize in agriculture and trade with other regions better suited to industrial specialization.

Evolution of employment share in agriculture aross Europe, 1900-2015. Source: Roses and Wolf database on Regional Development in Europe

Figure 1.6: Evolution of employment share in agriculture aross Europe, 1900-2015. Source: Roses and Wolf database on Regional Development in Europe

In terms of knowledge spillovers, the spatial impact of Calabria’s geography and neighbouring regions is important. In order to share knowledge between firms in a common industry, a la Marhsall-Arrow-Romer (MAR) spillovers, the closer firms in a similar industry are together, the greater the knowledge spillovers (Simmie 2002). The map below depicts the share of employment in manufacturing within Italy only from 1900 to 2015. What is evident is that in the North, the manufacturing hub is focussed around Lombardia, with neighbouring regions in the North also having relatively higher shares of employment in manufacturing, with the peak manufacturing employment in 1980. In contrast, the regions around Calabria see some of the lowest manufacturing employment levels. Hence it is not feasible for firms in Calabria who wish to transition to manufacturing to benefit from the MAR spillovers whereby workers share knowledge between firms and advance the common know-how in a region. In the future, Calabria would not benefit from attempting to transition into manufacturing, as we can see in the map also that in Lombardia, peak manufacturing has passed, with declining shares of employment in manufacturing in 2015 compared to 1980.

Evolution of employment share in manufacturing within Italy, 1900-2015. Source: Roses and Wolf database on Regional Development in Europe

Figure 1.7: Evolution of employment share in manufacturing within Italy, 1900-2015. Source: Roses and Wolf database on Regional Development in Europe

1.3.3 Pillar three: structural change

industrial restructuring as a result of various pressures.

Reallocation of opportunities across local industries.

1.4 Innovation investment and economic organization in Calabria

Leydesdorff (2021) notes that in 2001, Italy moved to give regions more autonomy in managing their health, education, economic and industrial development. As a result, funding for innovation and R&D was sharply reduced in the South (Leydesdorff 2021). Further, Leydesdorff (2021) argues that when applying the innovation-systemness lens and the triple helix system to Italy, it is best conceptualized as two distinct regions - the North and South, rather than 20 administrative regions, concluding that different innovation strategies could be developed for the two parts of the country.

Medium and high-tech manufacturing and knowledge-intensive services are concentrated and integrated in the North of the country.

De Muro, Monni, and Tridico (2011) argues that while in Northern Italy there was a conscious drive to change the structural and institutional features of regions in order to bring about a new economic model premised on “development of an advanced tertiary sector and knowledge intensive services,” in the South, this economic model resulted in new forms of exclusion and a greater polarization between the core and periphery areas.

With regard to the kinds of spillovers that are possible,

Future trends: due to the macro-economic situation in Southern Europe, the support for regional subsidies to rural areas has decreased - Calabria will be forced to make its economic turn around on its own steam - the North and the European Union will not have sufficient knowledge and capability to drive this change (González 2011).

1.5 Crux

Problem - wage setting determined by the North but lower marginal productivity means that the unemployment rate is higher in the South - see Enrico Moretti on this.

Boeri et al. (2019) Says that this is a problem.

1.6 Policy brief

The previous sections have shown that Calabria has missed the boat with regard to diverting a large share of the workforce into high skilled manufacturing. The North has already diversified out of manufacturing for the most part and into services. Hence, Calabria and the South should focus on the comparative advantages that it does possess in order to capitalize on the services based economy of the future. Specifically, the mediteranean climate and relatively large share of land devoted to agriculture such as olives and citrus plantations mean that it is primed to become a larger tourist destination. In order to facilitate an increase in tourism, policy makers should take a three pronged approach. First, in order to incentivize carbon-consious travellers to make it further South along the boot of Italy, Calabria should investigate in improving the over-night rail connections between the hubs of Milan and Rome and the South.

2 Tool for visualizing the Roses and Wolf database on Regional Development in Europe.

I have built a tool to visualize the data that I made use of in this essay - as well as a bunch more. It is an interactive web app available here2.

It looks like this:

You can see a stacked column chart depicting the sectoral shares of employment, a line chart of regional GDP and regional population compared to the national level, as well as a map that gives context on sectoral shares of employment in the surrounding regions.

Works cited

Boeri, Tito, Andrea Ichino, Enrico Moretti, and Johanna Posch. 2019. “Wage Equalization and Regional Misallocation: Evidence from Italian and German Provinces.” w25612. Cambridge, MA: National Bureau of Economic Research. https://doi.org/10.3386/w25612.
De Muro, Pasquale, Salvatore Monni, and Pasquale Tridico. 2011. “Knowledge-Based Economy and Social Exclusion: Shadow and Light in the Roman Socio-Economic Model: Knowledge-Based Economy and Social Exclusion in Rome.” International Journal of Urban and Regional Research 35 (6): 1212–38. https://doi.org/10.1111/j.1468-2427.2010.00993.x.
González, Sara. 2011. “The North/South Divide in Italy and England: Discursive Construction of Regional Inequality.” European Urban and Regional Studies 18 (1): 62–76. https://doi.org/10.1177/0969776410369044.
Leydesdorff, Loet. 2021. “Regions, Innovations, and the NorthSouth Divide in Italy.” In The Evolutionary Dynamics of Discursive Knowledge, 115–34. Cham: Springer International Publishing. https://doi.org/10.1007/978-3-030-59951-5_6.
Navarra, Michele, Carmen Mannucci, Marisa Delbò, and Gioacchino Calapai. 2015. “Citrus Bergamia Essential Oil: From Basic Research to Clinical Application.” Frontiers in Pharmacology 6 (March). https://doi.org/10.3389/fphar.2015.00036.
Piscopo, Amalia, Rocco Mafrica, Alessandra De Bruno, Rosa Romeo, Simone Santacaterina, and Marco Poiana. 2021. “Characterization of Olive Oils Obtained from Minor Accessions in Calabria (Southern Italy).” Foods 10 (2): 305. https://doi.org/10.3390/foods10020305.
Romeo, F. V., A. Runcio, A. Piscopo, T. Iaccarino, A. Mincione, and M. Poiana. 2014. “Characterization of Four Typical Calabrian Cured Meat Products: Spicy Sausage, Soppressata, ’Nduja and Capocollo.” Acta Alimentaria 43 (4): 564–73. https://doi.org/10.1556/AAlim.2013.0006.
Simmie, James. 2002. “Knowledge Spillovers and Reasons for the Concentration of Innovative SMEs.” Urban Studies 39 (5-6): 885–902. https://doi.org/10.1080/00420980220128363.

  1. https://www.wiwi.hu-berlin.de/de/professuren/vwl/wg/roses-wolf-database-on-regional-gdp↩︎

  2. https://jonathan-jayes.shinyapps.io/Roses-Wolf-database-on-regional-GDP/↩︎